Sheffield Inc. issues $2,170,400 of 8% bonds due in 12 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 9%. Click here to view factor tables What amount will Sheffield receive when it issues the bonds? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

Amount received by Sheffield when bonds were issued

$

James Kirk is a financial executive with Flint Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a good sense for numbers and has helped the company grow from a very small company ($463,000 sales) to a large operation ($41,670,000 in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which James Kirk feels a little over his head. He therefore has decided to hire a new employee with numbers expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to the following situations he has encountered recently. Here are the questions.

In 2016, Flint Enterprises negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On January 1, 2017, Flint took possession of the leased property. The 20-year lease is effective for the period January 1, 2017, through December 31, 2036. Advance rental payments of $730,000 are payable to the lessor (owner of facilities) on January 1 of each of the first 10 years of the lease term. Advance payments of $395,000 are due on January 1 for each of the last 10 years of the lease term. Flint has an option to purchase all the leased facilities for $1 on December 31, 2036. At the time the lease was negotiated, the fair value of the truck terminals and freight storage facilities was approximately $7,329,000. If the company had borrowed the money to purchase the facilities, it would have had to pay 10% interest. Compute the present value of lease vs purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

		Lease		Purchase
Present value		$		$

Should the company have purchased rather than leased the facilities?

Flint Enterprises should

purchaselease

the facilities.

Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $16,500 per year for 9 years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11%. At the time the land was originally purchased, it cost $88,400. What is the fair value of the note? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

The fair value of the note

$

The company has always followed the policy to take any cash discounts on goods purchased. Recently, the company purchased a large amount of raw materials at a price of $730,000 with terms 1/10, n/30 on which it took the discount. Flint has recently estimated its cost of funds at 10%. Should Flint continue this policy of always taking the cash discount? Flint shouldshould not continue the policy.